Minimum Wage Increases

Since 1997, the federal minimum wage has been stuck at $5.15 an hour. Under federal law, however, states are free to set a higher minimum wage. At the start of 2006, seventeen states and the District of Columbia had done so. Since Congress has refused to raise the federal minimum wage in nearly a decade, a growing number of states—with prodding from labor unions and community groups—took the initiative to raise their minimum wages in the past year. This summer, after these state wage hikes had built up enough momentum, Washington lawmakers considered raising the federal minimum.

The past year saw a flurry of states increasing their minimum wages:

In January, Marylandraised its minimum wage to $6.15 an hour, overriding the governor’s veto along the way. An estimated 55,300 minimum-wage-earners will directly benefit from the hike, and 173,000 will indirectly benefit from a ripple effect.

In February, Rhode Islandraised its minimum wage to $7.10 an hour starting in March and to $7.40 in 2007.

In March, Michiganannounced it would raise its minimum wage in increments, to $6.95 an hour on October 1, 2006, then to $7.15 next July, and finally to $7.40 in July, 2008.

In April, Arkansasraised its minimum wage to $6.25 an hour starting in October.

Also in April, Maineannounced it would raise its minimum wage to $6.75 an hour in October, then to $7.00 in October, 2007.

In June, Delaware announced it would raise its minimum wage from $6.15 to $6.65 an hour in January, 2007, then to $7.15 in January, 2008.

In July, Pennsylvaniaapproved a gradual minimum wage raise to $6.25 an hour on January 1, 2007, then to $7.15 on July 1, 2007, with an even more gradual increase for employers with fewer than 10 employees.

Also in July, North Carolinaapproved a minimum wage hike to $6.15 an hour, effective in January, 2007.

Also in July, Massachusettsraised its minimum wage from $6.75 an hour to $7.50 starting in 2007, and to $8.00 starting in 2008. Remarkably, the Massachusetts legislature unanimously overrode the governor’s veto of the bill, 152-0 in the House and 38-0 in the Senate.

In August, California's Democrat-led legislature and Republican governor reached an agreement to raise the minimum wage from $6.75 an hour to $7.50 in January, 2007, then to $8.00 in January, 2008.

In November, Ohio voters will have the opportunity to raise their minimum wage to $6.85 an hour; Arizona voters will have the opportunity to raise their minimum wage to $6.75 an hour; Montana voters will have the opportunity to raise their minimum wage to $6.15 an hour; Nevada voters will have the opportunity to raise their minimum wage to $6.15 an hour; Missouri voters will have the opportunity to raise their minimum wage to $6.50 an hour, with automatic adjustments for inflation; Colorado voters will have the opportunity to raise their minimum wage to $6.85 an hour; and New Mexico has proposed raising the its minimum wage to $7.50 an hour over the next three years.

Just as states have increased the minimum wage over the federal minimum, municipal governments have also taken the initiative to raise local living wages over the state minimum. Earlier this year, Santa Fe, New Mexico approved an increase in the minimum wage to $9.50 an hour, the highest rate in the United States. Also notable this year, Chicago recently passed legislation that would require “big box” stores (stores that occupy 90,000+ square feet and gross more than $1 billion annually) such as Wal-Mart to pay their workers at least $10 per hour, plus $3 per hour in fringe benefits.

How transparent was it that a minimum wage hike is due? Even Wal-Mart’s CEO called for a minimum wage hike in the past year, claiming that many Wal-Mart customers were struggling to buy basic necessities on the current minimum wage. A full-time employee who earns the national minimum wage of $5.15 an hour will make $10,712 a year—about $1,000 above the official poverty level of $9,654. Currently, the federal minimum wage, when adjusted for inflation, sits at a 50-year low.

Several recent studies have refuted the contention that raising the minimum wage may increase unemployment and harm small businesses. According to the Fiscal Policy Institute, New York’s minimum wage raises correlated with higher job growth in the retail industry—the industry most likely to employ low-wage workers. Meanwhile, another study has shown that no adverse effects in terms of unemployment and inflation have resulted from Florida’s decision to raise the minimum wage last year. Indeed, many economists now reject the notion that minimum wage hikes kill jobs.

In June, the House Appropriations Committee recommended a hike in the minimum wage from $5.15 to $7.25. In August, Senate Republicans were unable to overcome a filibuster by Democrats that would have hiked the federal minimum wage to $7.25 an hour, but would also have gutted the federal estate tax. Should the Democrats prevail in the November elections, Democratic leaders have said they would make the minimum wage—minus the estate tax poison-pill—a top priority.